USD/CAD Price Forecast: Sees more downside towards 1.3400
- USD/CAD consolidates around 1.3575, with investors awaiting the Fed’s monetary policy.
- The Fed is expected to keep interest rates steady on Wednesday.
- US Trump and Canada’s Carney aim to reach a trade deal within 30 days.
The USD/CAD pair wobbles inside Monday’s trading range around 1.3575 during the early European trading session on Tuesday. The Loonie pair trades sideways as investors await the Federal Reserve’s (Fed) monetary policy announcement on Wednesday.
Investors expect the Fed to leave interest rates steady in the current range of 4.25%-4.50% as officials have stated that monetary policy adjustments are inappropriate until they get clarity on how much new economic policies by Washington will impact the inflation and the economic outlook.
At the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades flat around 98.15.
Meanwhile, the Canadian Dollar (CAD) underperforms its peers on Tuesday even though Canadian Prime Minister Mark Carney and United States (US) President Donald Trump agreed to reach a trade deal within 30 days, Reuters reported.
Canadian Dollar PRICE Today
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.06% | 0.08% | -0.06% | 0.06% | -0.11% | -0.13% | -0.05% | |
| EUR | -0.06% | -0.00% | -0.10% | -0.00% | -0.14% | -0.10% | -0.13% | |
| GBP | -0.08% | 0.00% | -0.14% | -0.01% | -0.14% | -0.14% | -0.12% | |
| JPY | 0.06% | 0.10% | 0.14% | 0.11% | -0.07% | -0.07% | -0.02% | |
| CAD | -0.06% | 0.00% | 0.00% | -0.11% | -0.24% | -0.09% | -0.12% | |
| AUD | 0.11% | 0.14% | 0.14% | 0.07% | 0.24% | 0.03% | 0.02% | |
| NZD | 0.13% | 0.10% | 0.14% | 0.07% | 0.09% | -0.03% | -0.01% | |
| CHF | 0.05% | 0.13% | 0.12% | 0.02% | 0.12% | -0.02% | 0.01% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).
Theoretically, the scenario is favorable for the Loonie as the Canadian economy relies heavily on its exports to the US.
USD/CAD trades close to its eight-month low, which is around 1.3540. The overall trend of the pair is bearish as all short-to-long Exponential Moving Averages (EMAs) are sloping downwards.
The 14-day Relative Strength Index (RSI) oscillates inside the 20.00-40.00 range, suggesting that a bearish momentum is intact.
The asset could slide towards the psychological level of 1.3500 and the September 25 low of 1.3420 if it breaks below Monday’s low of 1.3540.
On the contrary, a recovery move above the May 29 high of 1.3820 would turn the near-term trend to bullish and open the door towards the May 21 high of 1.3920, followed by the My 15 high of 1.4000.
USD/CAD daily chart
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
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